How AI is being used for finance and investing

AI: The new financial adviser? Not quite yet

Story by
NADIA COMMODORE, ANNA MARES, MATTHEW PURUCKER, HALEY MORELAND, MEGAN TROTTER
TribLive

Sept. 9, 2024

Eric Kish is a fan of artificial intelligence.

The Tarentum resident said he’s seen its efficiency through his work at a local insurance agency.

“It makes processes go quicker — 24 hours a day as opposed to 9-5 when you have to talk to someone,” he said.

Kish liked how reliable AI can be.

“There’s a lack of personal touch, which can be a good thing because of language barriers as a lot of companies outsource,” he said.

Kish isn’t alone. Artificial intelligence (AI) has taken the financial industry by storm.

Because of its extraordinary anti-fraud capabilities and its ability to free bank employees from repetitive tasks and increase accessibility to banking or investment services, companies are eager to integrate AI into their practices.

Mandell Loman, Vice President of Treasury Solutions Commercial Card Payment Consultant at Citizens Bank, explained how AI can help bank employees who already have a lot on their plate.

“We have less people, but now we’re able to use artificial intelligence to do a lot of this work,” Loman said.

But it’s AI’s ability to spot fraud that’s had the biggest impact so far.

“AI doesn’t eliminate fraud, but allows the system to pick up and learn how a cardholder uses their cards,” Loman said. Using generative artificial intelligence, a subcategory of technology under the AI umbrella, banks can better understand the spending patterns of customers and easily identify fraudulent activity.

“It learns your behaviors and it learns ‘OK, this is how Mandell typically uses his card. This is kind of within the realm of acceptable activity,’” Loman said.

The software will then, according to Loman, trigger the defenses in place and alert the bank of any unusual activity.

But those benefits come with with challenges.

“In generative AI, you have the machines making decisions. That’s part of the dangerous point that you have to have governance over,” said Trebor Evans, the Chief Information Security Officer at Dollar Bank.

For that reason, many people choose not to use AI to help make their financial decisions — or at all.

“Technology has been used against us in so many ways, you just have to expect it,” said Cheryl Kopaczynski of Monroeville. “There are too many people who are tech savvy and take technology too far.”

This is why it’s important, Evans emphasized, to have bank employees looking over AI’s shoulder so they can ensure information is being kept safe.

Though AI is used in banking operations, Evans said, Dollar Bank employees are the ones managing their technology.

“(Dollar Bank) would like to use (AI), but we have to do it the right way,” said Evans.

And there are those who use it the wrong way.

With the rise in AI accessibility, many banks are taking measures to fight against scammers who use AI to commit fraud.

“We have had situations before where fraudsters are calling in to try and get details about a specific individual or company credit profile so that they can increase the credit limit on the card that they got a hold of,” Loman said.

Citizens Bank, like almost all others, requires specific security information about the cardholder before any changes can be made to an account.

Algorithms can help make better investment choices

When you invest money with financial advisers, AI might play a major role in where your money is invested.

With that in mind, a major concern with AI has been how financial institutions and consumers deal with the impact of AI algorithms. Specifically, why AI decides to invest in a certain company and with how much money will be scrutinized, as well as if the AI is making responsible decisions.

While that is possible and may become more common in the future, it’s not the current focus of AI in investing.

Instead of creating AI algorithms that inform financial advisers of investment possibilities, Morgan Stanley has led the development of AI@Morgan Stanley Assistant and AI@Morgan Stanley Debrief. Started with the support of OpenAI, these tools help improve access to the company’s intellectual capital and facilitate meeting note taking and summarizing.

“To be clear, neither tool is being used to make investment recommendations,” Morgan Stanley media relations representative Lindsey Madnick said.

Notably, these tools have increased the efficiency of the work of financial advisers. It has not eliminated their work nor replaced it with AI investment advice.

“We are thrilled by this technology’s potential to revolutionize an adviser’s day-to-day, and we look forward to additional iterations down the road,” said Vince Lumia, head of Morgan Stanley wealth management client segments. “Further, while advisers remain the center of our universe, we are more than excited to unlock the potential of this technology across all of our wealth management channels.”

Because AI can handle some of the more mundane tasks for investment advisers and streamline the investment process, experts say it can result in better investment decisions by humans.

The consensus in the industry, as least for now, is that AI making investment decisions itself without human oversight could be alarming to investors.

AI makes banking more accessible

That doesn’t mean it isn’t having an impact on the industry.

Many in the banking and financial advising industry emphasize the importance of tailored, personal care when it comes to financial planning. However, for individuals unable to afford a financial planner, AI technology and algorithms make budgeting and financial planning more accessible.

Douglas Raible, Partner at Sterling Heights Financial Group, LLC, started his firm as a lower-fee advisory for individuals unreached by the banking world. He has long offered free financial advising from his office and is now happy to refer individuals to AI tools that can do similar work.

“It helps the average, everyday person and democratizes (banking and financial planning),” Raible said.

Raible believes AI can help users with the parts of financial planning that don’t require deep thought, such as budget conversations. These can now be done with AI templates.

“Those who don’t have the money can still get their questions answered for free, and that can be great for unbanked individuals,” he said.

However, when it comes to Sterling Heights clients, Raible believes it is important to maintain high-quality customer service that can’t be outsourced.

“We’re hesitant on losing our personal touch by implementing all of the technology that bigger companies are using,” he said.

Nadia Commodore, Anna Mares, Matthew Purucker, Haley Moreland and Megan Trotter are TribLive staff writers.